Summary/Key Takeaways

In recent years, federal policy on supplemental environmental projects (SEPs)—voluntary and environmentally beneficial projects resulting from negotiation between the government and an alleged violator that would be unavailable outside the settlement context—has whipsawed between Republican and Democratic administrations.

Although SEPs were deployed in various enforcement contexts, the tool was strongly disfavored by the first Trump administration, which imposed stringent restrictions on their use. The Biden administration touted them publicly, including through rulemaking and updates to the Justice Manual. Despite the publicity surrounding the projects, in reality, the Biden administration only adopted SEPs in around 90 small-dollar administrative settlements and six judicial consent decrees from May 2022 to present. The Biden administration instead prioritized mitigation projects, which are injunctive relief more specifically designed to remedy or offset environmental harm.

Looking forward, the regulated community should expect major retrenchment on SEPs and settlements involving third-party payments under another Trump administration. While DOJ’s use of mitigation projects will likely continue under President Trump, such relief will likely be less of a focus in settlement negotiations. Beveridge & Diamond has issued a broader client advisory, Environmental Enforcement Update: What to Expect in the Second Trump Administration, that discusses anticipated changes in enforcement more generally.

Companies currently engaging in settlement discussions with the U.S. Environmental Protection Agency (EPA) or the U.S. Department of Justice (DOJ) (or who may do so in the future) should keep in mind:

• The second Trump administration will likely limit SEPs that involve third-party payments (i.e., payments to entities that are not a party in the enforcement matter).
• The federal agencies have specific congressional authorization to agree to SEPs that reduce diesel emissions; such projects are likely to remain viable despite presidential administration changes.
• EPA and DOJ will likely continue to demand mitigation to settle cases involving alleged excess emissions or discharges.
• In coordination with counsel, companies negotiating with DOJ should consider conducting their own estimates of excess emissions/discharges and develop a strategy for negotiating reasonable mitigation under the circumstances.
• Many States have authority under state law to seek SEPs, and several of those States are aggressive in seeking to include SEPs in enforcement resolutions. State authority will not be affected by any changes the Trump administration may institute. (If the federal government is a co-plaintiff in the case, however, the settlement will need to explicitly identify the SEP as arising under State law authorities.)
• The first Trump administration’s opposition to SEPs extended to similar projects in settlements of citizen suits. Companies should be aware of the possibility that the incoming administration may take the same position and seek to oppose such settlements.

Background on Use of SEPs in Settlements

Prior to the first Trump administration, DOJ and EPA used SEPs in settlements to resolve complicated enforcement matters. SEPs enjoyed broad support from the government, nongovernmental organizations (NGOs), and the business community because they supported beneficial and popular projects that addressed the environmental harm underlying the violations rather than being directed toward penalties.

Trump Administration (2017-2021)

During the first Trump administration, DOJ revised its approach to SEPs on a few different occasions. In 2017, former Attorney General Jeff Sessions issued a memorandum prohibiting settlements that directed or provided for payments to any non-government person or entity not a party to the dispute being settled, which limited but did not prohibit SEPs. In March 2020, however, former DOJ Environment and Natural Resources Division (ENRD) Assistant Attorney General Jeffrey Bossert Clark dramatically curtailed the use of SEPs.¹ Clark did say that SEPs involving the retrofitting or replacement of diesel engines to reduce diesel emissions were excepted from this prohibition because they were congressionally authorized. In December 2020, the Trump administration issued regulations formalizing the restrictions on SEPs.² While Trump’s EPA appointees never formally prohibited SEPs like DOJ management did, DOJ’s prohibition effectively foreclosed EPA SEPs as well.

Biden Administration (2021-present)

On May 10, 2022, Attorney General Merrick Garland announced several changes to DOJ’s approach to environmental enforcement and EJ issues. As part of this announcement, DOJ issued an interim final rule that reversed the Trump administration’s SEP actions and reauthorized DOJ lawyers to employ SEPs and settlements involving payments to third parties once again—subject to some additional guiderails. Attorney General Garland issued an accompanying memo stating that, among other things, SEPs should have a “strong connection to the underlying violation” and that the government should “not propose the selection of any particular third party or receive payments” or to be the beneficiary of such payments. Attorney General Garland simultaneously announced the establishment of the Office of Environmental Justice within ENRD and the release of DOJ’s Comprehensive Environmental Justice Enforcement Strategy.

On December 9, 2024, DOJ issued a final rule adopting the May 10, 2022, interim final rule without change and responding to comments that DOJ had received. The preamble summarized the legal basis for SEPs and settlements involving third-party payments and added two requirements to the Justice Manual. First, the Justice Manual will be revised to state that DOJ will only negotiate a settlement involving a third-party payment that is not within the scope of the remedies that a court could order when the defendant expresses interest in doing so. Second, the Justice Manual will stipulate that Department lawyers should ensure opportunities for public comment in settlements that include such payments.

SEP Activity Since May 2022

When DOJ announced the DOJ SEP policy change in mid-2022, many predicted a rapid and impactful return of their use. In reality, however, the return of SEPs has been measured.

SEPs in EPA Administrative Settlements

EPA has routinely resolved enforcement matters through administrative settlements—often stylized as “consent agreements and final orders” or “CAFOs.” These settlements are typical for smaller matters with more straightforward compliance requirements, and they can usually be finalized without DOJ involvement provided they meet certain statutory requirements (e.g., 42 U.S.C. 7524(c)(1), which sets a maximum administrative penalty).

After Attorney General Garland’s March 2022 announcement, EPA began finalizing administrative settlements with SEPs in the final quarter of that year. In total, EPA has entered less than 100 administrative settlements containing SEPs during the Biden administration—representing a small fraction of the thousands of settlements during that time. Some of the largest administrative settlement SEPs include:

1. A $641,831 SEP to upgrade emissions controls on a facility’s hazardous waste tank system.³
2. A SEP to purchase emergency response equipment (at an approximate cost of $41,270).⁴
3. A $2.1 million SEP requiring equipment upgrades to reduce hazardous air pollutants found in a facility’s wastewater treatment system and reduce the amount of total suspended solids in the facility’s effluent.⁵
4. A $600,000 SEP to purchase or subsidize electric-powered lawn and garden equipment.⁶
5. A $375,000 SEP to replace older diesel school buses with newer, cleaner running models.⁷

Compared to earlier administrations, the Biden-era SEPs generally have noticeably lower dollar totals. Only one has hit seven figures, and only four others exceed $500,000. Moreover, nearly 60% of such SEPs were valued at less than $100,000. Many of these lower-dollar SEPs required the purchase or upgrade of emergency response equipment for local communities. In other words, the SEP revival does not appear to have had a particularly major impact on EPA’s administrative settlement practice thus far, and the environmental impact of the actual projects is debatable.

SEPs in DOJ Consent Decrees

EPA also refers large, complex, or serious matters to DOJ for resolution. A number of factors can impact EPA’s decision to refer a case, including the seriousness of the violations, size of the potential penalty, complexity of injunctive relief demanded, or other legal considerations. Where DOJ negotiates a resolution for a referred matter, the settlement is typically memorialized in a consent decree signed by the parties and then entered by the presiding federal court—giving the agreement the effect of a court order.

Since 2022, DOJ has entered into only six consent decrees that contain new federal SEPs.⁸ The SEPs in those consent decrees included:

1. A $25 million project to replace diesel engines used for oil & gas well completions with more efficient engines to be used for no fewer than 108 well completions (and no fewer than 45% of the company’s well completions in any given year).⁹
2. A $5 million project to replace existing diesel transportation vehicles with cleaner vehicles (e.g., cleaner diesel, propane, compressed natural gas and/or electric) in underserved communities neighboring the facility.¹⁰
3. A $1.44 million project to convert a manufacturing facility’s “once-through” cooling water system to a recirculating closed-loop system.¹¹
4. A $400,000 project to reduce pollutant loads in stormwater runoff through the installation of green infrastructure practices (e.g., wet meadow/native planting areas, permeable pavers, etc.).¹²
5. A $900,000 project to reduce pollution levels in stormwater entering a reservoir by performing upgrades to increase the effectiveness of a detention basin and managing invasive species.¹³
6. A consent decree with three SEPs, including the purchase of two mobile health units (estimated at $80,000), provision of at least $220,000 of medical visits provided by a third-party medical provider, and purchase of at least $50,000 of medical equipment.¹⁴

A quick review of these projects yields a few important observations. First, two of the six SEPs are diesel emission reduction SEPs—and were therefore statutorily authorized even before DOJ revitalized SEPs in May 2022. Second, only three of the six had clear environmental justice (EJ) implications.¹⁵ Third, the dollar values of these SEPs pale in comparison to some of the massive projects funded prior to 2019; indeed, only one of these six consent decrees makes the list of the top 100 most valuable SEPs based on the data in EPA’s ECHO database. Therefore, the impact of DOJ’s revitalized SEP policy has been less significant than many initially predicted.

Mitigation Injunctive Relief in Consent Decrees

The Biden administration has maintained an aggressive use of a separate enforcement tool—namely, mitigation projects. Mitigation is injunctive relief to remedy, reduce, or offset past harms caused by violations in the case. There are three primary differences between mitigation and SEPs:

1. Mitigation is relief that the government believes a court could order as injunctive relief and that the government is prepared to pursue in litigation;
2. Mitigation requires a direct nexus between the project and the harm it redresses such that it helps restore the status quo ante; and
3. Mitigation warrants no direct civil penalty reduction.

Biden-era consent decrees included a variety of mitigation projects. Several settlements involving the natural gas processing industry included projects requiring equipment leak monitoring and repair at otherwise unregulated compressor stations, flare monitoring evaluations and upgrades, plugging and remediation of abandoned wells, and equipment and engine upgrades. None of these complicated settlements included SEPs. Other projects involved the replacement or upgrading of older diesel engines.¹⁶ Notably, these projects could also likely have qualified as diesel emissions reduction SEPs; the settlements, however, expressly characterized the projects as mitigation.

Citizen Suit Settlements

The incoming Trump administration may also oppose the inclusion of SEPs in settlements of private citizen suits in which the government is not a party. In the first Trump administration, DOJ filed an objection to the inclusion of a supplemental environmental project in the settlement of a case brought by Sierra Club against DTE Energy. The brief raised various arguments, including constitutional arguments based on the separation of powers. The district court rejected these arguments, but it is possible that the incoming administration may seek to renew these arguments if it becomes aware of a SEP in a citizen suit matter. NGOs are often quite forceful in seeking to include SEP-like remedies in case settlements. Accordingly, companies negotiating to resolve citizen suits should consider the implications of agreeing to a SEP or SEP-like project, including potential delays from DOJ opposition.

Conclusion and Outlook

While the Biden administration officially revitalized SEPs as part of its aggressive environmental justice agenda, the impacts of that policy change were slow to materialize. Indeed, as the above discussion illustrates, DOJ has only employed SEPs in limited circumstances while DOJ continued to aggressively pursue substantial mitigation projects in settlement negotiations.

With a second Trump administration on the horizon, however, companies should expect the landscape to shift once again. Restrictions on SEPs involving third-party payments are likely to return, with further restrictions possible depending on the new leadership of DOJ’s ENRD. In fact, Project 2025 expressly calls for a renewed prohibition on settlement payments to third parties.¹⁷ Additionally, the current GOP-controlled House passed legislation (called the “Stop Settlement Slush Funds Act of 2023”) that would limit third-party payment SEPs as part of the current session,¹⁸ and the legislation is likely to be reintroduced in the next legislative session.

Companies currently negotiating a SEP should expect delays in negotiations after Inauguration Day, and the likely elimination of any SEPs outside the diesel context. Specifically, EPA and DOJ may re-evaluate any projects that have not yet been memorialized in a lodged consent decree, and it is possible that the federal government may change a previously stated position or reject a project that had received preliminary approval. Such changes are less likely for settlements already entered by a Court.

Environmental enforcement cases will continue under the new Trump administration. In high-stakes cases where the government seeks mitigation, advanced planning and independent analysis will be critical. Moreover, due to the rapidly changing landscape, having experienced counsel prepared to negotiate the complex, technical issues involved in such projects will be more important than ever.

Beveridge & Diamond has assembled a task force to monitor the change in administration across multiple environmental, energy, and natural resources subject areas. Nearly two-thirds of the firm’s lawyers have prior U.S. state or federal government experience, and members of the Task Force include several former EPA and DOJ attorneys who served under both the initial Trump and Biden administrations. Beveridge and Diamond attorneys have substantial experience defending against environmental enforcement actions—whether brought by a state or federal authority, or under a citizen suit provision. Our attorneys are well-equipped to help companies navigate the complexities of negotiating environmental consent decrees—including mitigation projects and SEPs. If you have a question about an environmental enforcement matter or environmental policy under the incoming Trump administration more generally, please contact the authors.

¹ Former AAG Clark issued two key memos on SEPS: the first, dated August 21, 2019, instituted a prohibition on SEPS in settlements with state and local governments, and the second, dated March 12, 2020, included a broader prohibition covering civil settlements.

² 28 C.F.R. § 50.28

³ Giant Resource Recovery -- Attalla, Inc. Consent Agreement and Final Order, dated Sept. 30, 2024.

⁴ Pratt Energy, LLC Consent Agreement and Final Order, dated Sept. 29, 2023.

⁵ Evergreen Packaging LLC Consent Agreement and Final Order, dated Sept. 27, 2023.

⁶ Suncor Energy (U.S.A.) Inc. Consent Agreement and Revised Final Order, dated Sept. 6, 2023.

⁷ Dan’s Diesel Performance, Inc. Consent Agreement and Final Order, dated Aug. 24, 2023.

⁸ This list derives from EPA’s Enforcement and Compliance History Online (ECHO) database and DOJ’s website. ECHO reflects several other judicial consent decrees beyond those discussed here that include SEP money (including the AK Steel, City of Jackson, Mississippi, Northeast Ohio Regional Sewer District, Louisville and Jefferson County Metropolitan Sewer District, City of Toledo, and City of Evansville), but those entries reflect modifications to pre-2022 Consent Decrees that had SEPs. Additionally, the current discussion focuses on DOJ matters—which are generally larger and more complicated, and which have been subject to more intensive policy changes over the last several years.

⁹ Matador Consent Decree, lodged March 27, 2023.

¹⁰ BP Whiting Consent Decree, lodged May 17, 2023.

¹¹ Friesland Campina Consent Decree, lodged August 2, 2023.

¹² D.R. Horton Consent Decree, lodged April 8, 2024

¹³ Westchester Joint Water Works Consent Decree, lodged June 24, 2024.

¹⁴ BCP Ingredients, Inc. Consent Decree, lodged December 2, 2024.

¹⁵ EJ impacts were based on the federal government’s characterization of the settlements and not an independent screening of the facilities and affected communities. DOJ’s press release touted the EJ benefits of the BP Whiting consent decree. DOJ’s press release for the Westchester Joint Water Works matter suggests that one of the four affected communities was “overburdened.” EPA’s press release for the BCP Ingredients consent decree noted that “BCP’s facility is located in a community that has environmental justice concerns.”

¹⁶ See, e.g., Ingredion, Inc. Consent Decree, lodged November 21, 2023, or Tadano Ltd. Consent Decree, entered October 17, 2023.

¹⁷ Project 2025, Mandate for Leadership: the Conservative Promise at 558 (2024).

¹⁸ H.R. 788, 118^th Congress (2023-2024).